Stocks subdued as Trump tax cuts stoke fiscal fears

Stocks have been muted and the US dollar under pressure as investors fret about the fiscal outlook for major developed economies and the lack of progress on trade deals.

Oil prices rose more than one per cent after a CNN report said Israel was preparing a strike on Iranian nuclear facilities, raising supply concerns out of the key Middle East producing region and bringing geopolitical concerns back into focus.

Investor sentiment has been fragile since Moody's last week downgraded the United States' credit rating, stoking worries about the country's $US36 trillion ($A56 trillion) debt pile, with US President Donald Trump pushing for tax cuts that could worsen the debt load by $US3 trillion to $US5 trillion.

There are also concerns about a lack of progress on US trade talks with trading partners pressing Washington to ease or eliminate its tariffs.

The STOXX benchmark of major European shares fell 0.2 per cent in early trading on Wednesday, and US stock futures indicated a lower open on Wall Street.

Treasury yields have stayed elevated, with the yield on 30-year Treasury bonds hitting five per cent.

That brought no respite to the dollar as investors flocked to safe-haven currencies including the yen and the Swiss franc.

"People are looking at the idea of moving capital out of the US and it's certainly not a mass exodus, but people are looking at the opportunities in some of these other markets again," said Chris Weston, head of research at Pepperstone.

Investors sought those opportunities in Asia, with MSCI's broadest index of the region outside Japan up 0.8 per cent at a seven-month high.

In currencies, dollar selling accelerated in Asia, driving the yen, Swiss franc and the euro to their strongest levels in two weeks.

The pound touched a three-week high and last bought $US1.3428. British inflation jumped to a higher-than-expected annual rate of 3.5 per cent in April from 2.6 per cent in March.

Markets were also monitoring the Group of Seven finance ministers' meetings under way in Canada for any hints that a weaker dollar could help advance trade negotiations.

Investors in the Japanese bond market remained jittery after a steep selloff in super-long bonds in the previous session.

Yields on longer-dated bonds hovered near record highs on Wednesday, with questions over how the country could fund new fiscal stimulus, with the central bank trying to normalise monetary policy.

Data on Wednesday showed Japanese shipments to the US fell in April even as exports rose for the seventh straight month, highlighting the toll President Donald Trump's tariffs could take on the fragile economic recovery in Japan.

Analysts said any progress on deals between the US and its trade partners could fuel risk appetite, but there are concerns Trump's policies could still damage the global economy.

On Tuesday, US Federal Reserve officials said prices were rising on the back of higher US import tariffs and counselled patience before making any interest rate decisions.

Gold prices rose on Wednesday as the dollar weakened and investors flocked to safe-haven assets.

Spot gold was 0.7 per cent at $US3,311 per ounce, the highest in more than a week.